(1) [30 Points.] The County of Johnson collects, in addition to its own taxes, taxes for other units. Tax levies for 2015 were as follows:
County of Johnson $ 576,000 Johnson City 1,728,000 Johnson School District 1,536,000 TOTAL LEVIES $3,840,000
Collections from the 2015 levies amounted to $3,550,000, which were distributed in proportion to the original levies, less a 1% collection fee charged Johnson City and the Johnson School District. Collection fees are remitted to the County General Fund. Complete the following tasks:
(a) Record the tax levies in the County Tax Agency general journal. (Hint: There is no budget, no fund equity, and no revenue account.) (b) Record the collection from the 2015 tax levies in the Tax Agency Fund. (c) Calculate the specific amounts (liabilities) owed to each fund and unit. (Round all amounts to the nearest whole dollar.) (2) [30 Points.] "Enterprise Funds should not be permitted to accumulate profits, since to do so would indicate that its services are overpriced."
(a) Do you agree with this statement? Why or why not? (b) For what purposes might an Enterprise Fund accumulate earnings in excess of its direct (fixed plus variable) costs?
(3) [30 Points.] The Town of Hopeful has agreed to lease a used, reconditioned snowplow from a vendor for a total period of six (6) years. The snowplow has an expected remaining useful life of just six years, so that the lease qualifies for treatment as a capital lease. The lease calls for a total of six annual payments of $9,900 each at the beginning of each year. The first payment is due immediately upon commencement of the lease. (1) Assuming a reasonable interest rate of 8%, what is the net present value of the lease? (Don't forget that the first payment occurs immediately.)
(2) Create a Lease Amortization Table, using the following column headings:
Start of 8% Principal Outstanding Period Payment Interest Repayment Balance ? . 1 (now) $9,900 2 9,900 3 9,900 4 9,900 5 9,900 6 9,900 -0-
XXXXXXXXXXPoints.] On July 1, 2015, Durban County received the following securities to be held as the trust principal for a new County Museum Operating Fund. A separate trust fund will be established to management the trust assets.
Annual Interest Maturity Face Fair Value Bonds: Rate (%) Date Value at XXXXXXXXXXAB Co. 10% 1-1-20 $ 700,000 $ 718,000 XY Co. 9% XXXXXXXXXX,000 512,000 $1,200,000 $ XXXXXXXXXX
(a) In what type of fund should the receipt of the bonds described above be recorded? (b) Show in General Journal form the entry which should be made to record the receipt of the bonds. (Note: Remember to recognize "Unamortized Bond Premium.")
(5) [30 Points.] On September 3, 2017, the audit firm of Green and Jones completed its audit of the City of Deerfield's general purpose financial statements (GPFS) for the year ended June 30, 2017. The City presents its financial position, results of operations, and cash flows using the financial statements prescribed by generally accepted accounting principles. However, Green and Jones believe that the Deerfield Cultural Center, a theater for the performing arts that is financially underwritten (subsidized) by the city, meets the criteria specified by GASB for inclusion as a component unit in Deerfield's GPFS. Deerfield's finance director has steadfastlyrefused to include the cultural center in Deerfield's GPFS on the basis that it would cause the financial statements to be misleading. Green and Jones feel compelled to issue an "except for" qualified opinion to bring attention to this departure from GAAP, although they believe that the financial statements present fairly in all other respects. Green and Jones have determined that the effect of including the cultural center in Deerfield's GPFS would have been to increase the reported assets and revenues of the enterprise funds by $450,000 and $127,000, respectively, and to increase the excess of revenues over expenses in that fund type by $5,200 for the year ended June 30, 2017.
Required: Prepare the audit opinion letter that Green and Jones should issue in this instance. (6) The pre-closing trial balance for Sane City as of June 30, 2017 follows (rounded to the nearest dollar). Debits Credits
Cash and Investments $2,967,134 Receivables 383,231 Internal Receivables 5,550 Due from Other Governmental Units 181,126 Inventory 12,456 Capital Assets (Net) 2,123,998 Accounts Payable $ 46,453 Accrued and Other Liabilities 59,877 Internal Payables 85,471 Long-Term Debt 461,333 Net Assets-Invested in Capital Assets (Net of Debt) 1,795,685 Net Assets-Restricted for Debt Service 252,873 Net Assets-Unrestricted 3,261,221 Program Revenues: General Government-Charges for Services 1,373,662 General Government-Operating Grants 232,295 Police-Charges for Services 142,351 Police-Capital Grants 646,837 Cemetery-Charges for Services 35,653 Roads and Bridges-Charges for Services 42,443 General Revenues: Property Taxes 1,666,862 State Shared Revenue 622,683 Investment Income 197,751 Expenses: General Government 2,665,568 Police and Fire 1,512,564 Cemetery 30,098 Roads and Bridges 542,256 Interest on Long-Term Debt 289,469 Depreciation on Capital Assets (Unallocated) 210,000 TOTAL $10,923,450 $ XXXXXXXXXX
Additional Inthrmation is as follows:
(I) Depreciation expense is to be functionally allocated as follows: General Government 40%; Police and Fire 30%; Cemetery 10%; and Roads and Bridges 20%. (2) The change in net assets is due in part to the increase in capital assets arising from a capital grant, with the balance attributed to unrestricted net assets. (3) For sake of simplicity, assume the city has no business-type activities or component units.
Your tasks are to:
(a) [10 Points] Prepare the Closing Entry for the year ended June 30, XXXXXXXXXXb) [40 Points] Prepare the required government-wide financial statements for the year ended June 30, 2017.